Three weeks prior to the 5th BRICS Summit, the launch of the BRICS Development Bank looks quite certain. The media buzz about the bank has become to intense in BRICS capitals and among policy observers that anything but the creation of the bank would be interpreted as a disappointment and proof of the BRICS’ incapacity to ever gain any institutional structure. The ‘paper launch’ of the bank, then, is quite certain – most likely, however, few details will be provided at the summit – rather, an expert group will be tasked to work that out over the coming months and perhaps years.
Fundamental questions about the bank remain, such as:
1. Will there be a physical secretariat or will it be a ‘virtual bank’, akin to a network among the BRICS’ national development banks? If there will be a secretariat, where will it be? Pretoria and Shanghai are informal candidates, though both Russia and Delhi is said to be against the latter.
2. Will each country contribute the same amount (the talk is currently of 10 billion US-Dollars) or will members contribute according to the size of their economy? South Africa is said to prefer the latter, India the former as it fears China’s dominance. Why, Indian policy makers ask, did South Africa seek to become a BRICS member if it is unwilling to make a serious commitment now?
3. Will the bank be controlled by emerging powers alone or will established powers be allowed to have a minority stake?
4. Will the bank invest only within BRICS countries or also outside, i.e., in Africa? India is said to prefer to former, as it requires massive infrastructure investment, and it would be far more comfortable taking loans from a BRICS Development Bank than a Chinese-controlled bank.
5. Will the bank develop lending paradigms that differ from those created by the World Bank and other established banks? This one is perhaps the most important question of all. Some say that the bank will avoid the conditionalities the World Bank and the IMF attach to their loans. This could lead Western observers to accuse the BRICS Development Bank of providing “rogue loans” and undermine the West’s attempts to promote good governance in the developing world.
This last question points to a larger uncertainty about the future of global governance. Will emerging powers’ projects such as the BRICS Development undermine existing institutions and the principles that sustain them? BRICS policy makers go out of their way to point out that the BRICS Development Bank will “complement” existing institutions – yet why then, skeptics will ask, do they not hand over the money to the World Bank, the IMF or other institutions that are already in place? Why go through the hassle of creating a new institution?
The answer, clearly, is that while emerging powers seek a larger role within the existing framework, they do not feel established powers are willing to provide them with the adequate power and responsibility – reforms at the World Bank and the IMF have been too slow, and not far-reaching enough. The World Bank remains, despite its name, essentially a Western-dominated institution in the eyes of emerging powers. It is difficult to read the creation of the BRICS Development as anything other than that.
Read also:
The Case for IMF Quota Reform (Council on Foreign Relations)
Does Kim Signal World Bank Changes? (Council on Foreign Relations)
At BRICS track II meeting in Chongqing, focus lies on strengthening intra-BRICS cooperation
Image drawing by Andrey popov
